Struggling Ford Puts the Brakes on Production

As part of its "Way Forward" restructuring campaign, the Ford Motor Company says it will reduce its fourth-quarter vehicle production by 168,000 in North America, compared with a year ago. That's down more than 20 percent. The company hopes to reduce bulging dealer inventories by temporarily shutting down ten plants. Analysts say the production cuts could pay off if Ford's new models prove popular.

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Today the Ford Motor Company announced that it's cutting production of cars and trucks by more than 20 percent in the last three months of the year. The move will force temporary shutdowns of 10 Ford assembly plants in North America. The company cited high gas prices, which have cut into demand for the company's most profitable SUVs and pickup trucks.

NPR's Scott Horsley reports.

SCOTT HORSLEY reporting:

CEO Bill Ford acknowledges that the manufacturing slowdown will have a dramatic impact on the company's employees and suppliers. But he says it's the right call for customers, Ford dealers and the company's long-term future. The cuts won't save Ford a lot of money on labor costs, since hourly workers still receive most of their pay.

But Walter McManus of the University of Michigan's Transportation Research Institute says it should mean fewer unsold vehicles piling up on dealers' parking lots.

Mr. WALTER MCMANUS (University of Michigan): They had been operating their plants like they were all still bigger than they really are. And that builds up inventories at their dealerships, which the only way they can sell are with ever-growing incentives and, you know, low interest rate discounts to customers.

HORSLEY: After losing more than $250 million in its most recent quarter, Ford plans to slash production by 20,000 vehicles in the current quarter and another 168,000 vehicles in the last three months of the year. The biggest cutbacks will be in SUVs and pickup trucks. Demand for SUVs dropped off sharply this year as the price of gasoline neared $3 a gallon. And McManus says Ford is also seeing a drop in demand for its signature F-Series pickups.

Mr. MCMANUS: The pickup truck has been traditionally the most loyal segment. People will come back with a full-size pickup and they'll get another full-size pickup. And a growing share are leaving pickups for something else.

HORSLEY: And that something else may not be a Ford. The same is true in the SUV market. A year ago, Ford's gas-guzzling Expedition SUV outsold Toyota's smaller Rav4 by more that two to one. Last month, those sales figures were reversed.

Mr. MCMANUS: Last month for the first time in history, Toyota sold more than Ford. For them actually to sell less than Toyota was quite a blow.

HORSLEY: Ford says it will announce additional efforts to cut costs and return to profitability in September. According to the Wall Street Journal, the automaker is considering additional plant shutdowns and cuts in its white collar workforce of 10 to 30 percent.

Analyst Efraim Levy of Standard and Poor's predicts more losses for Ford in the short run. But he says the production cuts and other moves could pay off down the road.

Mr. EFRAIM LEVY (Standard and Poor's): Plus cutting is part of the equation that they need to do. The real recovery will come when they come out with the products that people want to buy that they don't even have to discount. That people are going to say this is compelling. I want to buy it because I like the product.

HORSLEY: Ford is expected to unveil some news models after its next board meeting in mid-September.

Scott Horsley, NPR News.

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